In 2020 the retail supply chain was stretched to the limit and bounced back, taking a new shape in some cases. In the midst of COVID-19 shutdowns and challenges, research showed that consumers were empathic to delays, however, meeting customer expectations still required new levels of ingenuity and dedication.
Shortages of staples like toilet paper and hand sanitizer, as well as rice, beans and other foodstuffs, lay bare the complexities of stocking store shelves during a pandemic. In the early days, 4 in 10 shoppers admitted they stockpiled items in a Convey consumer study. Fortunately, 60% of shoppers didn’t expect retailers to stock every item they ordered.
Perhaps the most revealing trend was the resilience of the American consumer. By the end of the year, retail sales had nearly recovered to pre-pandemic levels, according to the National Retail Federation. Behind that positive statistic, you’ll find a number of key developments from 2020 that point the way to building whatever the new normal may become in future years.
1. Consumers Embrace eCommerce
Consumers quickly adapted to ordering more products online. Some consumers, who rarely, if ever, shopped online, found they had few other choices. Some folks began ordering groceries and other consumables for the first time. Unlikely categories like home improvement materials and patio furniture surged. Overall, the pandemic accelerated eCommerce adoption by three to five years.
In-store pick up, whether curbside or in-the-store pickup, skyrocketed as well. Grocery chains are among the leaders here, using automation to assemble thousands of uniquely packaged items efficiently. This channel will likely continue to thrive because it appeals to time-strapped consumers who’d rather grab and go than shop every aisle.
E-commerce spending is expected to grow by low-double-digit percentages through the next six years even after the end of social distancing measures forced by the pandemic, according to a new forecast from media-buying giant GroupM, part of WPP PLC.
When restrictions lift, some consumers will likely return to in-store shopping stores. However, some retail giants like Walmart and Target are making long-term investments to support the shift to eCommerce fulfillment, as are many grocery chains. Customers quickly became accustomed to the ease of online shopping and the prevalence of fast, free or low-cost delivery. For 64% of buyers, free shipping was their top priority for shopping online.
2. True Omnichannel Fulfillment Wins
Before the pandemic hit in full force, many retailers were confident they had developed an omnichannel fulfillment network. After all, they were serving both online and in-store customers. But the rapid shift to eCommerce in the wake of the pandemic shutdowns highlighted the shortcomings of companies who only thought they had an omnichannel network. Before the pandemic, many retailers served store fulfillment out of one distribution center or a portion of a facility. They managed eCommerce fulfillment from a separate location or a different set up in the same facility.
When stores shut down and online orders surged, retailers found they could not shift inventory between the channels as quickly as they thought they could. Products in high demand were stuck in the store fulfillment facility and could not be easily repositioned to the eCommerce channel. It took some retailers several months to either move inventory to the right place or beef up eCommerce capabilities wherever the merchandise was located. We saw indications of inventory issues with increased parcel and freight fulfillment times as retailers had to wait for inventory to catch up to orders.
Customers expect a fully omnichannel experience. That means they want to buy an item from their channel of choice with no difference in availability, pricing or delivery time. Also, they want to be able to return an item through any channel, regardless of which channel it was purchased in. If they bought a sweater that doesn’t fit, they want to return it to a convenient store location.
Retailers that can develop true omnichannel capabilities, where all inventory is treated as a single resource, will have the agility to adapt to rapid shifts in consumer buying preferences
3. Customer Experience Counts
While customers forgave availability issues and shipping delays early in the pandemic, expectations still remained high. About 20% of shoppers blamed the brand for shipping delays regardless of who was at fault. Estimated shipping times play a role in purchase decisions, so customers expect to see this information before ordering a product. Updates along the way are vital as well. A late shipment has much less of an impact if the customer knows about it. We found 70% of consumers are more likely to stop doing business with a retailer if they’re not informed of a delay. It’s kind of like having a mechanical delay for a flight – there’s nothing you can do about it, but it’s reassuring to know what’s going on.
4. Data-Driven Management
Supply chain visibility was critical to managing through pandemic disruptions and will be essential in the coming years. This visibility is vital to understand the customer journey and deliver on the customers’ priorities.
The combination of omnichannel retailing, customer experience, and data-driven management can reshape final mile execution for a competitive advantage. Retailers that employ best-in-class practices can compete with free shipping and other amenities that lead to repeat business from finicky consumers.
Resilience, or the ability to bounce back after a challenge, was the hallmark of 2020 for the supply chain as well as consumer spending. Strong growth in retail sales during the last few months pointed to the resiliency of consumers even in this disruptive pandemic environment, NRF Chief Economist Jack Kleinhenz pointed out. From the aforementioned toilet paper to the vaccine distribution networks that sprang into place in December, supply chains were resilient as well. Retail supply chains were stretched and strained and perhaps assumed a new shape but were never broken.
While it’s understandable to want to leave 2020 in the rearview mirror, its challenges offer insights for retailers planning for the future. Resilient, agile supply chains are the key to maintaining relationships with customers in the most trying of circumstances.
Many retailers saw record sales during some very trying times. With a supply chain honed during the crisis, imagine how well retailers can perform when hopefully things return to something resembling normal.